HUD: Proposed Rule Issued to Make Section 3 More Efficient and Effective

Section 3 is a HUD statute that requires recipients of HUD funding to the greatest extent feasible employ low- and very-low income persons and businesses in the communities HUD serves

The U.S. Department of Housing and Urban Development (HUD) today published a proposed rule to improve the effectiveness and efficiency of Section 3 of the Housing and Urban Development Act of 1968. Section 3 requires employment, training, contracting, and other economic opportunities generated by certain HUD financial assistance to be directed to the greatest extent feasible to low- and very low-income persons, especially recipients of government assistance for housing, and to businesses that provide economic opportunities to low- and very low-income persons. See the proposed rule here.

HUD’s outdated Section 3 regulations have not been updated since 1994 and are not as effective as they could be at creating employment opportunities for low- and very low-income persons and businesses. The changes in the proposed rule are intended to improve the effectiveness of Section 3, streamline some processes that do not yield significant benefits, and encourage public housing authorities (PHAs) and HUD grantees to focus on career ladders for low-income people, all with the aim of increasing the long-term earnings of HUD-assisted households.

“HUD funding is more than an investment in affordable housing or community development, it’s an investment in people,” said HUD Secretary Ben Carson. “The rule we are proposing today will allow more HUD-assisted households to secure long-term employment, and put them on a path towards self-sufficiency.”

The changes in the proposed rule seek to improve effectiveness by:

  • Focusing on key outcome metrics, such as the sustained employment of targeted populations;
  • Crediting retention of low-income employees and successful sustained employment in the reporting metrics;
  • Aligning Section 3 reporting with standard business practices and payroll tracking;
  • Allowing for tailored outcome benchmarks for different geographies and/or different activities;
  • Reducing reporting requirements for grantees who are meeting outcome benchmarks; and
  • Integrating Section 3 into the program offices who are in regular contact with the grantees.

The proposed rule is a result of a Secretarial established taskforce and feedback received from listening sessions held with small and large PHAs, grantees, multifamily property owners and other entities involved with Section 3. Interested members of the public are encouraged to submit comment on HUD’s proposed rule by June 2, 2019. Comments can be submitted at

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